C 7. When bonds are issued by a company, the accounting entry shows an a. increase in liabilities and a decrease in stockholders' equity. b. increase in liabilities and an increase in stockholders' equity. increase in assets and an increase in liabilities. d. Increase in assets and an increase in stockholders' equity. B. Bennington Corp. issued a $40,000, 10-year bond at the face rate of 8%, paid semiannually. How much cash will the bond investors receive at the end of the first interest period? $800 b. $1,600 $3,200 $4,000 a. C. a b. 9. The bond issue price is determined by calculating the present value of the stream of interest payments and the future value of the maturity amount future value of the stream of interest payments and the future value of the maturity amount. c. future value of the stream of interest payments and the present value of the maturity amount d. present value of the stream of interest payments and the present value of the maturity amount. 10. All of the following refer to the face rate of interest on a bond except: a. stated rate effective rate c. nominal rate coupon rate b. d. 11. If bonds are issued at 101.25, this means that a. a $1,000 bond sold for $101.25 b. the bonds sold at a discount. a $1,000 bond sold for $1,012.50 d. the bond rate of interest is 10.13% of the market rate of interest 12. When bonds are sold for less than the face amount, this means that the a maturity value will be less than the face amount b. maturity value will be greater than the face amount. C bonds are sold at a premium d. face rate of interest is less than the market rate of interest. 13. One way analysts measure the ability of a company to meet its obligations is to calculate the times interest earned ratio for any outstanding debt the company may have. For Tempo Solutions Corporation, $10,000 of bonds paying 6.5% annually is outstanding, Income before interest and taxes is $7,000. How would Tempo Solutions Corporation calculate the times interest earned ratio? income before interest and taxes divided by the interest expense. b Income before interest and taxes divided by carrying value of the bonds outstanding Income before interest and taxes divided by the face rate on bonds Face amount of bonds divided by income before interest and taxes a d 2